Luxury Cars

The interview: Lex Pedersen, Co-Founder of Chrome Temple

A nondescript warehouse in Sydney’s Northern Beaches is not the likeliest HQ for a flashy new investment fund – and gives away few clues as to the riches within. Inside, it’s a different story: row after row of high-gloss, high-octane supercars fill the space, some on full display; most, tantalisingly hooded and double-stacked. It’s just one of three sites housing the luxury auto assets in Chrome Temple’s growing portfolio.

“We’re taking a professional, data-led approach to a hobby investment,” says co-founder and portfolio manager Lex Pedersen. “In equities, there’s no more room for sophistication. But this is a whole new space. Most people are buying these cars sitting on the throne. But if you can do this all day every day, in an unemotional, data-led way, there’s opportunity.”

The Chrome Temple fund has been running for two years, has $10m+ under management, owns more than 20 vehicles, and has “proven the model on six-figure cars”, says Pedersen. Now he’s eyeing seven- and eight-figure cars, and a $100m fund.

“The mentality in the past was that buying any sort of exotic car would be a depreciation journey,” says Pedersen. “But now, you have a finite, diminishing supply, and demand is expanding. The strongest-performing cars are going to be the higher-ticket ones. In a year from now, I’d like all our assets to be seven to eight figures. All are internationally significant. If you have one of 10, and the other nine are tightly held, you set the market.”

Even as Pedersen talks through the investment case – a data-driven thesis that has won over serious finance players, not only as investors but also onto Chrome Temple’s board – there is the ever-present pull of the metal, the passion and the driving pleasure that inspire, but notably don’t inform the fund.

“We’re unemotional,” says Pedersen. “Porsche is my favourite marque, but to date, we don’t have any in the fund for yield reasons – however, that is about to change.”

That said, he’s perfectly happy to trade on the emotion in the market – which is central to the investment thesis. “I talk about book ends; as a collector, you either want the first or the last. There’s some great stuff in the middle, but the real performers, on paper, will be the first and the last,” he says. “Chrome Temple is focusing on the last – the last 8s, 10s, 12s, manual gearboxes, driver’s cars. Cars are going to get faster, but you won’t have that analogue attraction. There’s a visceral connection – and emotion can drive the price through the roof.”

While cars have always been a passion, Pedersen spent much of his career in retail, and it was Covid that led him down the auto investment track: “Life’s short; invest in what you’re passionate about,” was his takeaway. Even so, when he first started exploring alternative assets, cars weren’t a given.

“I did years of research on whisky, watches, wine, every passion asset, and what gave me supreme confidence in cars was European legislation,” says Pedersen. “It’s not a consumer-led fad; it’s mandated change. In a year’s time, the marques can’t turn around and say, ‘We miss the V12, let’s bring it back.’ It’s a truly finite resource.”

And not just finite, but also diminishing, as Pedersen is quick to point out. “Some people are putting significant kilometres on their cars; some don’t sufficiently service and uphold their provenance; and every other day, you see a supercar meeting its fate at the hands of inexperienced owners – all of which diminishes the quantity and quality of the supply side of this marketplace,” explains Pedersen. “While on the demand side, we have an emerging and expanding population of collectors, particularly those coming into their peak earning years with a hunger for auto treasures – and for one-up-manship. So demand will only continue to grow even as these already scarce cars continue to diminish.”

This both begs and answers, the question: Does Pedersen – or his investors – ever drive the cars?

“We have access to a private track, and we’ll take fund assets to be exercised – they need to move, they perish if they sit. We put a professional driver in the seat, I give them a brief – don’t go past X revs, Y speed, all that kind of stuff,” says Pedersen. “And that presents as an opportunity for investors to come along. They can jump in the hot seat, they can bring their own car, and be part of a community.”

If there’s something lost here, in the staticness of these supercars, it doesn’t appear to trouble Pedersen, who views the assets more as art pieces than as vehicles.

“A big part of the joy of it is the thrill of the chase. I don’t drive a lot of cars. Once you’ve got them, it’s like, what’s next? I enjoy the research, the hunting,” he says. “I’m moving more towards being an art dealer – that’s the philosophy I’m taking.”

And that’s where the Chrome Temple community comes in – to share the pleasure of the collection with other art lovers. “There are so many car collections out there – I thought I had a pretty good radar, but you have no idea,” says Pedersen. “You walk past a dusty roller-door, just round the corner from here, and there’s $15m to $20m worth of cars in there. A lot of them fly under the radar – discretion is really important.”

This is where Pedersen sees the real opportunity for the fund: in the discretion, the community, the off-market of impossible-to-access cars – those that command seven and eight figures – that rarely if ever hit the open market.

“We use the term ‘instant classic’,” he says. “Usually vehicles will go through a J curve: there’ll be some depreciation, and at some point – be it electrification, scarcity, celebrity – they re-appreciate for whatever reason. We have a full-time analyst looking onshore, offshore, where a vehicle is travelling on that curve, and what’s caused the re-appreciation; where do we want to buy and where do we want to sell. We put a fair bit of science into it.”

“But then there are cars like the Lamborghinis downstairs, where you see instant appreciation,” he continues. “And if you’re lucky enough to get that allocation – it’s all relationships – well, we’ve got some amazing cars that have near-on doubled in value out of the gates.”

Pedersen’s vision for the $100m fund brings it all together: fewer cars with higher values, sourced and stored anywhere in the world, and fuelled by an investor base of like-minded enthusiasts with dusty roller doors concealing outsized collections of their own, who are keen to tap Chrome Temple’s access, insights and community – not to mention its investability.

“I think there’s an opportunity for a global brand, a global community,” says Pedersen. “That’s my big hairy audacious goal.”

The interview: Lex Pedersen, Co-Founder of Chrome Temple

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